The yield on the benchmark 10-year paper continued to rise even as the RBI on Friday announced a mish-mash of liquidity steps to facilitate what governor Shaktikanta Das said was an orderly evolution of the yield curve to ensure the Centre gets the funds for its borrowing programme at reasonable rates.

As part of its yield management exercise, the Reserve Bank of India (RBI) said it will undertake a secondary market government securities acquisition programme or G-SAP 2.0 worth Rs 50,000 crore in two tranches.

“Our recent G-SAP auctions that have focussed on securities across the maturity spectrum are intended to ensure that all segments of the yield curve remain liquid,” Das said while announcing the third bi-monthly monetary policy.

But the moves to control yields have received a lukewarm response from investors. On Friday, the yield on the 10-year bond rose to 6.234 per cent which casts doubt on Das’s claim that G-SAP has been successful in “anchoring yield expectations”.

There will be four 14-day variable rate reverse repo (VRRR) auctions between August 13 and September 24 when the RBI will be soaking up Rs 13 lakh crore. Das said this should not be misconstrued as “a reversal of the accommodative policy stance”.

Libor alert

In order to ensure a smoother transition from Libor to alternative benchmarks by December, the RBI will amend the guidelines related to export credit in foreign currency and restructuring of derivative contracts. Banks will be permitted to extend export credit in foreign currency using any other widely accepted alternative reference rate in the currency concerned. Since the change in reference rate from Libor is a “force majeure” event, the exercise will not be considered as restructuring of loans.